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One of the strangest things about being a startup
founder is that I'm running a multimillion-dollar company but
earning a salary far below my market value. My company may be
worth a lot, but the vast majority of my personal net worth is
tied up in an illiquid asset (company stock), which is no help to
me as a mom with two small kids, a mortgage, medical bills and
day-to-day expenses.

Five years in and easily $500,000 below what should have been my
accumulated earnings since 2009, I'm left scratching my head. I
hear murmurings that some founders sell personal shares long
before an exit. Should I do the same? Should you if you're in
this boat?

A quick survey of other startup founders revealed that they
believe it's OK to sell a tiny percentage of stock (in the single
digits) once a company's valuation
reaches $10 million.

What you want to avoid is the obvious cash grab. People grimaced
when Foursquare founders Dennis
Crowley and Naveen Selvadurai took home $4.6 million--23
percent--of their $20 million Series B funding in 2010.

Most of the founders I spoke with agree that you should try to
sell to inside investors
first. "It gives you a cleaner cap table, and you can tell a
better story around it; i.e., the insiders wanted to help you
stay focused on the long term," says Jon Crawford of e-commerce
platform Storenvy. He points out that if the people closest to
you are pushing for a bigger slice of your stock holdings, it's a
testament to just how valuable they think your company is.

Karl Jacob, startup founder and angel
investor since the 1990s, has witnessed CEOs sleeping in
their cars because they can't make their rent. "That's not good
for anyone, including the investors, who need a CEO working long
hours in top mental and physical form," he says. To ensure that
you don't end up in this scenario, Jacob advises startup founders
to pay close attention to their stockholder agreements upfront to
make sure they can sell a small percentage without restriction.

I'm not sure if I'll take the plunge and sell some of my stock to
ease my cash crunch, but it's nice to know that it's not
necessarily viewed as a bad move.